Local hard money lender screwed me big

Louisville, Kentucky
Real Estate Horror Stories
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Local hard money lender screwed me big

Patrick Mattingly
Member since 2025 · 4 posts · 1 vote

I recently used a local hard money lender here in Louisville KY for my first flip. Everything went very smooth until lender sent a payoff demand that exceeded my promissory note by $28k. Where I should have netted $35k on my first flip I walked with $8k. 

Lender tacked on over $30k in additional fees I never signed for. When I disputed the amount they threatened to foreclose on me if I didnt sign the closing statement when I resold the home. 

What can I do??

1Reply
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Erik EstradaBusiness Member
Lender · Member since 2022 · 6k+ posts · 1k+ votes
6mo
Quote from @Patrick Mattingly:

I recently used a local hard money lender here in Louisville KY for my first flip. Everything went very smooth until lender sent a payoff demand that exceeded my promissory note by $28k. Where I should have netted $35k on my first flip I walked with $8k. 

Lender tacked on over $30k in additional fees I never signed for. When I disputed the amount they threatened to foreclose on me if I didnt sign the closing statement when I resold the home. 

What can I do??


 Make sure to read the entire note you signed when you purchased the property. Many HMLs will use a lawyer to create loan documents for them. Read the repayment schedules, prepayment terms, late fees, etc.. 

If there is nothing on there showing that would trigger the excessive fees on the payoff statement, I would pursue legal action. 

This is actually very common to see in some private funds. They bet on the borrower losing the collateral, and make profit from excessive loan fees etc.. 

[email protected]818-269-7983
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3Reply
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  • Shane Ward
    Albrightsville, PA · Member since 2018 · 118 posts · 79 votes
    7mo

    What fees did they tack on? I've used HML for 14 deals and they pretty cut and dry but I did have one with an awful lender that nearly cost me a lot of money.

    0Reply
  • Ed B.
    Real Estate Investor · Sacramento, CA · Member since 2010 · 292 posts · 103 votes
    7mo

    are  you sure you didn't miss reading or understanding the fine print? If you already signed the closing statement that included the overcharges, you should be able to get the nullified on the basis you only signed under duress. I suggest finding a lawyer to help you, and consider a lawsuit against the lender for pulling that trick.

    1Reply
    • Patrick Mattingly
      OP
      Member since 2025 · 4 posts · 1 vote
      6mo
      Quote from @Ed B.:

      are  you sure you didn't miss reading or understanding the fine print? If you already signed the closing statement that included the overcharges, you should be able to get the nullified on the basis you only signed under duress. I suggest finding a lawyer to help you, and consider a lawsuit against the lender for pulling that trick.


       I am positive, the line item took 50% of my profit. 

      0Reply
  • Gregory Wilson
    Member since 2024 · 238 posts · 132 votes
    7mo

    Was this a prepayment fee? Gotta read the fine print.

    0Reply
  • James WilcoxBusiness Member
    Real Estate Agent · Bowling Green KY ~ Lexington, KY · Member since 2015 · 1k+ posts · 600 votes
    6mo

    I feel there is definitely more to this story. That doesn't add up to me. I suggest either just be glad you made $8K or consult a real estate attorney and have them look over your documents.

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    2Reply
    • Chris SeveneyBusiness Member
      Moderator
      Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
      6mo
      Quote from @James Wilcox:

      I feel there is definitely more to this story. That doesn't add up to me. I suggest either just be glad you made $8K or consult a real estate attorney and have them look over your documents.


       I agree. Not enough information in the post to even get a good understanding of what the charge was and if this person was paying the loan etc.

       First if I get a payoff and disagree with it, especially for $28k I would question it and dispute it and specifically ask "where in the documents is this noted". I would not just willingly accept an additional $28k. 

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      2Reply
  • Trevor Knorpp
    Member since 2023 · 29 posts · 11 votes
    6mo

    I am local to that area. Do you mind sharing the name of the lender?

    0Reply
  • Patrick Mattingly
    OP
    Member since 2025 · 4 posts · 1 vote
    6mo

    Sure Point Equity, LLC

    0Reply
  • Gregory Wilson
    Member since 2024 · 238 posts · 132 votes
    6mo
    Signing the closing statement does not release the lender no matter what it says. Start with the Kentucky Dept. of Financial Institutions. If they are not intersted try the Attorney General KY
    1Reply
  • Ken M.
    Investor · Get yourself trained before doing something inadvisable. · Member since 2024 · 3k+ posts · 1k+ votes
    6mo
    Quote from @Patrick Mattingly:

    I recently used a local hard money lender here in Louisville KY for my first flip. Everything went very smooth until lender sent a payoff demand that exceeded my promissory note by $28k. Where I should have netted $35k on my first flip I walked with $8k. 

    Lender tacked on over $30k in additional fees I never signed for. When I disputed the amount they threatened to foreclose on me if I didnt sign the closing statement when I resold the home. 

    What can I do??

    Buy an hour of time with a local real estate attorney to go over the documentation. Take all of the documents with you and have your questions written down so you don't forget them.
    2Reply
  • Erik EstradaBusiness Member
    Lender · Member since 2022 · 6k+ posts · 1k+ votes
    6mo
    Quote from @Patrick Mattingly:

    I recently used a local hard money lender here in Louisville KY for my first flip. Everything went very smooth until lender sent a payoff demand that exceeded my promissory note by $28k. Where I should have netted $35k on my first flip I walked with $8k. 

    Lender tacked on over $30k in additional fees I never signed for. When I disputed the amount they threatened to foreclose on me if I didnt sign the closing statement when I resold the home. 

    What can I do??


     Make sure to read the entire note you signed when you purchased the property. Many HMLs will use a lawyer to create loan documents for them. Read the repayment schedules, prepayment terms, late fees, etc.. 

    If there is nothing on there showing that would trigger the excessive fees on the payoff statement, I would pursue legal action. 

    This is actually very common to see in some private funds. They bet on the borrower losing the collateral, and make profit from excessive loan fees etc.. 

    [email protected]818-269-7983
    LuxePrivate Investments LLC 572 Reviews
    WebsiteView Page
    3Reply
  • Gregory Wilson
    Member since 2024 · 238 posts · 132 votes
    6mo

    Upload the note to Claude or ChatGPT AI and ask if there are assessable fees or penalties. That is what your lawyer will do for $500/hr.

    1Reply
  • Natalie KolodijBusiness Member
    Moderator
    Tax Strategist| National Tax Educator| Accepting New Clients · Member since 2014 · 3k+ posts · 4k+ votes
    5mo

    I had a client have something very similar happen this year. 

    I don't know what the original loan terms were and if it was a "didn't read the fine print" situation; but they also walked away with with an astronomical amount of fees and lost 6 figures across the two houses that lender funded. 

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    1Reply
  • Gregory Wilson
    Member since 2024 · 238 posts · 132 votes
    5mo

    This is a very heavily regulated industry both federal and state. There is no reason for significant losses to go unaddressed. I think we are wasting time on sets of bad facts.

    0Reply
  • Henry Lazerow
    Real Estate Agent · Chicago, IL · Member since 2017 · 2k+ posts · 2k+ votes
    5mo

    When you leave the conventional loan realm you start to deal with the occasional scummy people. I had a lender for a rehab loan tack 1.5 extra points on 4 days before close, all the emails stated different amount of loan costs. It was not worth suing for 1.5 points so let it go but if your story of $28k is true you 100% should get a lawyer and look into suing them as well as report them to your state for fraud. 

    1Reply
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